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[quote user="Datafever"] Okay, I've gone off and done my homework.  After much reading (particularly in the areas of electric utilities and telecommunications), I have come to the conclusion that my orginal concept of cross-subsidization is only a part of the picture.It seems to be commonly accepted that urban utility customers cross-subsidize rural utility customers.  For instance, the maintenance cost per mile of rural lines is higher than the cost per mile of urban lines.  In addition, there are significantly fewer customers per mile of rural line than there are in urban areas.  So even though rural customers *may* pay a higher rate than urban customers, it is commonly accepted that their rates would be significantly higher if they had to pay full cost.  What this means is that (a large number of) urban customers pay a slightly higher rate so that (a small number of) rural customers can end up with a significantly reduced rate. Similarly in manufacturing - if a product is not being sold at a price high enough to not only cover the cost of manufacturing the product, but also the full cost of research, development and marketing of the product, then that product is considered to be cross-subsidized. What is not considered to be cross-subsidization is differing profit rates.  If one product produces a profit margin of 20% while another product only produces a profit margin of 2%, no cross-subsidization is considered to have taken place.Based on that, I would then have to agree that any shipper that pays less than approximately 135% R/VC is potentially being cross-subsidized.  (The 135% number based on Mr. Sol's value that fixed costs are approximately 35% of variable costs). [/quote]That's probably the most reasonable approach, far more reasonable than the GAO's extreme example of defining only rates above 300% R/VC as being captive.  It should be disappointing to any American that the normally credible GAO would use such an extreme and irrational methodology for determining captive rail customers.Here's some articles in Railway Age that touch on the subject of the looming spector of harsher regulations to come:<a href="http://www.railwayage.com/B/xfromtheeditor.html">http://www.railwayage.com/B/xfromtheeditor.html</a><a href="http://www.railwayage.com/B/feature1.html">http://www.railwayage.com/B/feature1.html</a>No wonder the GAO's (and Ken's) ascersion that "only 6% of rail customers are captive" seemed more fishy than usual.......
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